AFRICAN EAGLE RESOURCES PLC 
By
ENCOURAGING PROGRESS AT
AFRICAN EAGLE'S DUTWA NICKEL PROJECT IN TANZANIA
Drilling programme started and metallurgical testwork well advanced
* Drilling programme underway
* Phase two metallurgical testwork well advanced
* Updated resource estimate expected Q1 2010
* Recruitment in progress of a Project Manager
for Dutwa
African Eagle's Managing Director Mark Parker comments, "We are
pleased to report significant progress at our exciting Dutwa Nickel
Project in Tanzania. Our 120-hole RC drilling programme is now
underway and laboratory testwork is well advanced. We have chosen a
contractor for a transport and logistics study and will appoint a
contractor for advanced deposit modelling shortly."
"We have also advertised for a Project Manager with a process
metallurgical background, one of a number of recruitments and
management changes required to transform African Eagle from an
exploration group into a nickel development and mining company."
The Dutwa Scoping Study, delivered in July, made a strong investment
case for the project, indicating a likely Internal Rate of Return of
about 25% at the current nickel price of around US$8.50/lb, or 17% at
the base case price of US$7/lb. Net Present Value estimates at these
nickel prices were US$530 million and US$200 million (pre-tax)
respectively.
The Study identified several key areas which could have major
positive impacts on the economics of the project. These include
increasing the global resource by delineating the adjacent Ngasamo
deposit, determining the optimum processing method by conducting
further metallurgical testwork, and reducing the cost of transporting
chemical reagents to the mine site.
Through a successful Offer and Placing in August, the Company raised
£3.3 million additional capital to fund these studies and progress
the project towards feasibility.
Drilling and deposit modelling
African Eagle has now begun a programme of approximately 60 infill
and step-out drill holes on the main nickel deposit at Wamangola
Hill, with the objective of increasing the JORC Inferred Mineral
Resource of 31 million tonnes at an average grade of 1.1% nickel,
estimated by SRK in November 2008. The drilling should allow the
resource to be delineated to Indicated category.
After completion of this programme, drilling will move to the nearby
Ngasamo Hill, which has a laterite blanket similar to Wamangola Hill
and affords the opportunity to increase the current resource by
another 15-20 million tonnes. African Eagle is in joint venture with
Safina a.s. of the Czech Republic, owners of the mineral title to
Ngasamo Hill, and can earn a 75% interest by including Ngasamo in the
global feasibility study.
An independent consultant will be contracted shortly to carry out
deposit modelling and mine planning on the drill results.
Metallurgical Testwork
Another 250 kilograms of drill core has been despatched to Mintek
laboratories in South Africa for the second phase of metallurgical
testwork, which includes tank and column leach tests, rock strength
and abrasion measurements and agglomeration tests. This work will
help to determine the best extraction process and optimise the
parameters such as acid concentration, residence time and leach
temperature.
Once the results of the phase two testwork are in hand, the Company
plans to undertake more diamond drilling to provide a further one
tonne of drill core for advanced metallurgical testwork.
Transport Study
Transport and logistics costs will be a significant contributor to
overall operating costs and the Company is currently assessing bids
to conduct a detailed investigation into the transport alternatives.
The study will examine port options and road, rail and lake transport
in both Tanzania and Kenya, with the aim of minimising transport
costs.
Project Manager
African Eagle has begun the process of transformation from an
exploration group into a nickel development and mining company. New
staff will be recruited to bring in the skills needed, and the
Company is currently advertising for a Project Manager with a process
metallurgical background and project management experience. Details
of the post are available on the Company's web site and in the mining
press.
Technical terms
A glossary of technical terms used by African Eagle in this
announcement and other published material may be found at
www.africaneagle.co.uk/p/glossary.asp
For further information:
Mark Parker
Managing Director
African Eagle
+44 20 7248 6059
+44 77 5640 6899
Nicola Marrin
Seymour Pierce Limited, London
Nominated Adviser
+ 44 20 7107 8000
Charmane Russell
Russell & Associates, Johannesburg
+ 27 11 8803924
+27 82 8928052
Ed Portman / Leesa Peters
Conduit PR, London
+44 20 7429 6607
+44 77 3336 3501
About African Eagle
African Eagle is a diversified mineral exploration and development
company operating in eastern and central Africa. The Company's
principal advanced assets are the Dutwa nickel laterite discovery in
Tanzania, where the Company completed a scoping study in June 2009,
and its 49% interest in the Mkushi Copper Mines joint venture project
in Zambia, for which a draft feasibility study was completed in Q4
2008.
African Eagle is evaluating a second promising nickel laterite
deposit at Zanzui in Tanzania and has defined a JORC gold resource
estimated at half a million ounces at its Miyabi gold project in
Tanzania. The Company holds a well-balanced portfolio of promising
earlier stage gold, copper, platinum and uranium projects, including
the Ndola and Mokambo projects in the Zambian Copperbelt and the
Igurubi gold project in Tanzania.
Zambia, Tanzania and Mozambique, the sites of African Eagle's
projects, are all countries which have highly prospective geology,
relatively low above-ground risks and track records of successful
major investments in the metals and minerals industries.
In December 2008, African Eagle resolved to prioritise the Dutwa
project, because the Board believes that, of all the Company's
projects, it offered the greatest potential to add value. To take its
other discoveries into production, African Eagle is seeking industry
partners with records of successful mine development, by means of
joint ventures, farm-ins, spin-outs or other mechanisms.
About the Dutwa Project
African Eagle has discovered a significant nickel laterite deposit in
the Dutwa project area in the Lake Victoria Goldfield. Within
Tanzania, the project is favourably situated 100km east of the
railhead at Mwanza and close to the main Mwanza-Nairobi trunk road, a
major power line and the shore of Lake Victoria.
The Company holds a 90% interest, with option to acquire 100%, over
the Dutwa laterite deposit and in 2009, signed a Letter of Intent for
an option and joint venture over another nickel laterite at Ngasamo,
5km west. In all, African Eagle has explored a total area of more
than 750km² in the project area.
Since the discovery of the Dutwa nickel deposit in June 2008, African
Eagle has explored the project very quickly and cost-effectively,
including resource drilling and an independent resource estimate;
laboratory metallurgical and mineralogical tests which revealed that
the deposit could be processed efficiently by sulphuric acid
leaching. On 24 June 2009, the Company announced the results of its
"proof of concept" scoping study. The study, by GRD Minproc of Perth,
Western Australia, indicated that the project can be economically
viable, and African Eagle has now begun work towards a definitive
feasibility study.
The Study indicates that Dutwa, if it were in production today, would
be profitable. Earnings, on an EBIT basis, would be of the order of
$110 million per annum on average over the life of mine, giving an
internal rate of return around 20%.
As a potentially low-cost producer, the upside for the Dutwa project
is considerable if nickel prices are above the $7/lb used in the base
case. The following table shows the key metrics for several upside
cases.
Ni price US$/lb 9.00 8.50 8.00 7.50 7.00 6.50
Life of mine EBIT $M 2,600 2,300 2,000 1,800 1,500 1,200
Pre-tax IRR % 31 27 24 21 17 13
Post-tax IRR % 27 24 21 18 15 11
Pre-tax NPV $M 640 530 420 310 200 90
Post-tax NPV $M 430 350 270 190 110 30
Base case: Abbreviations:
Nickel price = US$ 7/lb ($15,430/tonne) EBIT = Earnings before
Cobalt price = US$ 10/lb interest and tax
Discount rate = 10% IRR = Internal Rate of
Transport cost = US$100/tonne Return
(8¢/tonne/km) NPV = Net Present Value
Tax rate = 30%, fiscal incentives not DCF = Discounted cash flow
accounted analysis
Royalty = 3%
All numbers stated to 2
The financial modelling was conducted in significant digits
US dollars with an estimated accuracy of
±30%
The Study adopted a fairly broad brush approach to many of the costs,
to demonstrate "proof of concept" and provide indicative economics.
GRD Minproc estimated individual capital and operating costs to ±
30%, based on their considerable experience with nickel laterites.
These variables will be determined with more accuracy and confidence
during the forthcoming feasibility work.
The Study identified several key areas where further testwork and
detailed study are especially likely to result in improvements to the
"bottom line" or to important gains in confidence. These areas
include:
* Improved global deposit model and the potential for early
"high-grading". The Ngasamo resource will be drilled and
incorporated into a more sophisticated global resource model and
mining plan. From this, it will be possible to establish whether
richer ore can be mined first, giving increased early cash-flow and
an improved NPV.
* Ore beneficiation and project scale. The capital and
operating costs of the plant would be reduced if mechanical
beneficiation of the ore prior to leaching yields a smaller tonnage
of richer material for processing through the plant.
* Advanced leaching testwork. Column and vat leach tests at
bench and pilot scale will determine the best operating conditions
to optimise nickel extraction, including acid concentration,
residence time and temperature.
* Reagent cost reductions. The cost of reagents, notably
sulphur and lime, will be a significant component of operating
costs and profitability will increase considerably if these costs
are minimised. Transport is a substantial part of the reagent
costs and ways to minimise this will be investigated, as will the
availability of more local sources, particularly of lime.
* More sophisticated fiscal and economic modelling. Tanzania
offers a number of tax incentives for exploration and mine
development, which were not fully accounted in the Study economic
model.
In August, the Company raised £3.3M additional capital through a
Placing and Offer, to address these issues and progress the project
towards feasibility. Further metallurgical testing has commenced on
drill core samples at Mintek laboratories in South Africa and the
Company has started infill drilling at Dutwa and resource drilling at
Ngasamo.
African Eagle acquired the Dutwa project for its gold potential, but
the Company's exploration team quickly recognised that there was
significant nickel laterite potential. There is very little outcrop,
so the Company conducted extensive ground magnetic surveys to reveal
the underlying structure and geology. The Company also compiled
historical data, including detailed geological maps and trench
results dating from 1956, when rock chip samples from the trenches
over the ultramafic rocks were reported as yielding up to 1.9%
nickel.
Greenstones and granites underlie the project area. The greenstones,
of Archaean Nyanzian age, are mostly metamorphosed volcanic and
sedimentary rocks, with some banded iron formation in the east.
Several large ultramafic bodies occur within the greenstones and the
nickel laterites form a blanket up to 60m thick on top of these.
To investigate the nickel discovery, the Company undertook trial
drilling in June 2008. The results were very encouraging and a
139-hole reverse circulation (RC) drilling programme was completed to
delineate the resource. African Eagle also undertook a 10-hole
diamond drill programme to obtain core samples for metallurgical
testing and density measurements.
In November 2008, African Eagle announced an initial Inferred Mineral
Resource estimate of 31 million tonnes at an average grade of 1.1%
nickel and 0.034% cobalt. At a cut-off grade of 0.5% nickel, this
gives Dutwa a contained metal endowment of some 340,000 tonnes of
nickel and 11,000 tonnes of cobalt. The estimate was prepared by
independent consultants SRK Consulting (UK) Ltd in line with the
Australasian Code for Reporting of Mineral Resources and Ore Reserves
(the JORC Code). A little additional drilling and more advanced
geostatistics and deposit modelling will be needed to upgrade the
resource to Indicated category.
Ngasamo Hill, 5km west of the Dutwa deposit, is geologically very
similar and holds a laterite deposit of the order of 15 to 20 million
tonnes, which would increase the global resource at Dutwa from the
currently defined 31 million tonnes at 1.1% nickel, to some 45 - 50
million tonnes. Drilling and metallurgical tests will be needed to
confirm the size, grade and compatibility of Ngasamo. Under its
agreement with Ngasamo's owners, (Safina a.s. of the Czech Republic
and its Tanzanian subsidiary Precious Metals Refinery Company Ltd),
African Eagle can earn an interest of at least 50% and up to 75% in
Ngasamo by carrying out exploration and evaluation work, up to a
feasibility study.
Mintek Laboratories in Johannesburg investigated the mineralogy and
metallurgy of mineralised drill samples from the deposit, including
extended 'bottle roll' sulphuric acid leach tests to investigate
metal recoveries and acid consumption. Mintek also carried out
mineralogical characterisation by X-ray diffraction (XRD), scanning
electron microscopy (SEM) and polished section work.
The bottle roll test results showed nickel extractions of 70-90% with
an average of 83%. Cobalt extractions were mostly in the range 70 to
85%. The acid consumptions, averaging 209kg/t, are very low compared
to other Ni laterite ores worldwide.
The mineralogical investigations show that the laterite is extremely
silica-rich, with low iron and magnesium content, indicating that
Dutwa is not a typical laterite nickel deposit. Mintek believes that
much of the nickel and cobalt occurs in "wad" with manganese content
of 20-60%, nickel content of up to 20% and cobalt content of up to
10%.
The unusual mineralogy of the deposit is highly beneficial, as it
results in lower acid consumption and is expected to give good heap
leach permeability or favourable liquid-solid separation in tank
leaching. The concentration of nickel and cobalt in the manganese wad
offers the possibility that mechanical selection of high-grade
material may allow reduced throughput and hence a lower cost
processing plant.
The Company is also investigating other potential nickel laterite
deposits in Tanzania, and has completed a trial programme of RC
drilling to test a laterite at its Zanzui project, 60km to the south
of Dutwa. Results included 42m at 1.05% nickel (including 6m at
2.80%) and 33m at 0.91% nickel (including 9m at 1.41%).
---END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
Copyright © Hugin AS 2009. All rights reserved.AFRICAN EAGLE RES : Dutwa Project Update
October 20, 2009 at 02:05 am EDT
Share
Share
© GlobeNewswire - 2009
